The Association of Independent Financial Advisers is launching an initiative which is designed to ease IFA concerns over retrospective action taken by financial services regulators.
Entitled Stakes in the Ground, this immense data-gathering project will for the first time put on record the accepted practice and processes of an intermediary related to giving investment advice today, along with documented evidence of how decisions are made in that process alongside economic conditions affecting them.
Chris Cummings, Aifa director general, believes the database could help to reduce the prospect of retrospective legislation or regulatory action as regulators, trade bodies and firms will then have evidence of IFA practise when any reviews or reforms are conducted.
Until now, it has been difficult to prevent such action as there is little evidence to show exactly what a financial adviser's business processes were and how they affected clients.
“The investment community has a continuing worry over retrospective action by the FSA and FOS. Examples continue to present themselves where a regulator or Ombudsman appears to be applying current regulatory standards to assess actions that were taken against a very different economic and regulatory backdrop.
He continues: “No universally-accepted documentary evidence exists of custom and practice for years gone by. As an answer to this gap, the “Stakes in the Ground” paper was prepared by Aifa. This paper proposed documenting today’s accepted practices, the prevailing economic climate, and general environment for financial services, publishing the results for comment, and making the findings generally known.”
Aifa hopes to later extend the initiative to the mortgage and general insurance sectors too, as its primary aim is to reduce intermediary fears over retrospective action being taken by the Financial Ombudsman Service (FOS) and Financial Services Authority (FSA).
Fay Goddard, Aifa deputy director general, says the initiative will be a database of accepted practice, processes and products so the Aifa has put out a tender to find a firm independent of any vested interests which can create the historical record of investment industry best practice.
Beyond this, the Aifa currently has little idea of what the initiative will finally look like, as Goddard adds: “We need to establish a business plan and we have to get support to fund it, so we are building an idea of what it will look like and we hope to have this completed by the end of the year. We would then hope to begin roll it out in bite-size pieces sometime next year.”
Backing for such an initiative seems to be wide-ranging among other trade and professional bodies, as Aifa says it has established is a coalition of willing support from other trade bodies including the Association of Mortgage Intermediaries, the Investment Management Association, the Association of Private Client Investment Managers and Stockbrokers, the Association of British Insurers and the British Bankers Association. The FSA’s Practitioner Panel has also expressed interest in the work.
Seed funding is being negotiated with industry trade bodies to pay for the first phase of the project so any firm wishing to submit a tender for the management contract should do so by 5th September 2005.
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